Categories: How to Business

Community of property or antenuptial? Which option is best

Many of us look forward to the day when the ‘question is popped’ and preparations for the big day begin.…

For some people discussing the type of marital regime to apply to a marriage can be awkward.

But it must be discussed as there are legal consequences that flow from each type of marital regime and your choice will determine your proprietary rights during your marriage and when it is dissolved whether by death or divorce.

In South Africa we have two basic marital regimes: marriage in community of property and marriage out of community of property.  The latter is sub-divided into two further options, that is, with the accrual system or without.

Community of property

If you do not enter into an antenuptial contract prior to your marriage, you’ll automatically be married in community of property. This means assets and debts of both spouses will fall into one communal pot including pre-marriage assets and debts.

The spouses have equal authority over the joint estate. Both are jointly liable for the debts in the marriage irrespective of who incurred the debt.

Insolvency during the marriage affects both spouses as the joint estate will be sequestrated.

Perhaps this is one of the most prejudicial consequences of marrying in community of property. It can be risky for one party who’s prudent while the other party is financially irresponsible.

On the death of a spouse, only 50% of the joint estate may be bequeathed in terms of a will to beneficiaries of choice which may include the surviving spouse.

If there’s no will, the laws of intestate succession dictate that a surviving spouse will be entitled to a portion of the estate if not all.

In the event of divorce, each spouse has a 50% right over the assets in the joint estate and are equally liable for the debts.

Out of community of property

The parties involved enter into an antenuptial contract. The accrual regime is applicable to all marriages out of community of property unless the parties have specifically excluded the accrual system in the contract.

Each spouse retains their separate estates after marriage. They may deal with their assets as they wish and are entirely responsible for their own liabilities; hence a spouse’s separate estate is not at risk of being attached by the creditors of the other spouse.

On death of a spouse, the estate may be bequeathed in terms of a will to beneficiaries of choice which may include the surviving spouse. If there’s no will, the laws of intestate succession dictate that a surviving spouse will be entitled to a portion of the estate, if not all.

Accrual system

The wealth accumulated during the marriage is shared when the marriage is dissolved either by death or divorce.

The spouse whose estate shows less growth during the marriage will acquire a claim at the end of the marriage against the estate of the other spouse for half of the value of the difference in the growth (accrual).

This type of marriage is suitable for spouses who wish to have financial autonomy over their estate during their marriage but are amenable to sharing the accrual at the end of the marriage.

Without the accrual system

The spouses in this marriage are entitled to separate estates during the marriage and retain the separateness even on dissolution of the marriage by death or divorce.  Spouses have no rights over each other’s estate.

This type of marriage is suitable for spouses who wish to have financial autonomy over their estates at all times. It offers no protection to spouses who are low earners or who contribute to the marriage by raising the children and running the household.

To have one’s existing marital regime changed involves a protracted and costly legal process. There must be sound reasons for the proposed change, sufficient notice given to creditors and the change may not prejudice the rights of any other persons.

Disclaimer
The material is not intended as and does not constitute financial or any other advice.
The material does not take into account your personal financial circumstances. For this reason it is recommended that you speak to an accredited broker or financial adviser to consider all your options and draw up a plan to achieve your financial goals.
You can also contact Koos Nel, Head of Old Mutual Agri via email  knel1@oldmutual.com.

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